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Blockchain Will Disrupt E-Commerce

E&Y Entrepreneur of the Year Award winner (2017) who successfully completed Nasdaq IPO of AMRH. Mentor at Columbia University.

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The winter of 2017 was spectacular for the cryptocurrency markets, which reached an unprecedented high. 2017 Google Trends indicated how hot Bitcoin was last year -- it was the second most searched topic under the global news category, while "How to buy bitcoin" was the third most sought-after "how to" question. Then, in an equally spectacular manner, bitcoin crashed and has lost 70% of its value ever since.

Today, the cryptocurrency is at $8,000. Does this ring a bell? It certainly takes you back to another boom and bust that shook the tech world and the financial market -- the dot-com boom and bust.

On March 10, 2000, the dot-com bubble had reached a crescendo. From there on the markets tanked. How far down did they go? Here are some examples: Cisco dropped by 86%. Qualcomm, which had grown 2619% in 1999, came crashing down as well.Their valuations were destroyed in the coming months.

By the end of the stock market downturn of 2002, stocks had lost $5 trillion in market capitalization since their peak. At its trough on October 9, 2002, the NASDAQ-100 had dropped to 1,114, down 78% from its peak.

There are important similarities between these two downturns. Consider what life was like in 1995. Big banks often asked engineers like me, "Why would a bank like us need a website?" They ridiculed engineers and technology enthusiasts as hype-mongers. By 1997, though, the dot-com boom had started changing the language of banks and businesses, and the internet became a tsunami by 1999. Like all tsunamis, the dot-com boom and bust left a lot of trash all over the market. Yet, the technology survived. Every bank and every other company moved onto the web. Just as the dot-com crash did not deter the march of technology, Bitcoin’s fall from grace won’t check the onward march of blockchain technology.

Blockchain is a digital ledger that is decentralized and secure, and we expect every industry to adopt some form of blockchain in the coming years. A Gartner forecast (registration required) says "the business value-add of blockchain will grow to slightly more than $176 billion by 2025, and then it will exceed $3.1 trillion by 2030."

One key industry that will go through tremendous transformation thanks to the adoption of blockchain is e-commerce. According to eMarketer estimates, retail e-commerce sales amounted to $2.304 trillion in 2017, up by nearly 24.8% over the previous year. What's more, mobile commerce made up 58.9% of digital sales.This indicates that the burgeoning e-commerce space is ripe for a disruption by way of blockchain adoption.

When the democratization of information happened via the web and browsers, the clear winners were Amazon and similar companies that used the e-commerce playbook. In fact, 1995 was the year that witnessed the birth of Amazon.com, as the much-quoted story suggests, in a Bellevue garage. The e-commerce player has not just survived the dot-com bust but has thrived in the years since.

Now, with the mainstreaming of blockchain, Amazon and a bunch of similar e-commerce players will go through a major disruption. There are two primary drivers for this transformation.

1. Decentralization, As Opposed To Monopoly

As we all know, the monopoly of e-commerce by a handful of players is almost complete. There are hardly any challengers to existing players, and the cost of change is too high. Normally, if you look at any industry, whenever a near monopoly emerges, a new technology emerges and disrupts that industry. In 2007, Nokia was the king of mobile phones.Then came Apple, which was the least expected disruptor. Similarly, when IBM was the king of the computer industry, Microsoft emerged as the disruptor. The time has now come for blockchain to disrupt the e-commerce space. Blockchain technology essentially decentralizes control and ensures that trust is achieved without the need for a centralized power. It also means greater transparency and power to the consumer.

2. Regulatory Changes

One of the biggest regulatory changes has come in the form of General Data Protection Regulation (GDPR,) Europe’s data law which came into effect on May 25 of this year. The data protection law will have an impact on blockchain technology and e-commerce players. Whether it is GDPR or other regulatory frameworks, monopolies in the e-commerce world will come under different kinds of attacks. The new regulatory changes will have a definite impact on existing players.

How Will These Changes Help The Marketplace?

A good example would be Amazon, which has nearly 80 private labels, according to a report from One Click Retail, a retail analytics company. As vendors and manufacturers begin to understand the extreme power of Amazon, they will react in different ways. That’s the stepping stone to a disruption of the Amazon monopoly.

Customers are becoming more aware of monopolistic powers, and they take a deep interest in knowing the origins of a product, its sustainability and so on. This will result in a shake-up of e-commerce players, and a lot of vendors may get filtered out. Also, the price control exerted by monopoly players will be a differentiator for customers. Enhanced transparency will mean the customer is aware of what she is buying.

It has been observed that the foundation for building a great firm is often laid during the bust years. History will repeat itself. A new star will be born on the blockchain firmament, one that will change the e-commerce landscape.